Double tariff whammy hits Korean steel as EU barriers pile on top of U.S. tariffs

SEOUL, April 15 (AJP) - When it rains, it pours for South Korean steelmakers as they face collateral damage from higher trade tariffs in Europe on top of U.S. duties aimed at curbing cheap Chinese imports. 

The European Parliament and the Council of the EU hammered out a deal on Monday (local time) after late-night negotiations, setting tariff-free quotas at 18.3 million tons per year — nearly halved from about 35 million tons permitted under the current safeguard regime. Imports exceeding the cap will face a 50 percent duty, up from 25 percent. 

The measures, pending formal endorsement and a plenary vote expected in May, are set to take effect on July 1.

The agreement also introduces a "melt and pour" traceability rule requiring importers to prove where raw steel was first smelted and cast — a provision targeting steel from overcapacity countries, chiefly China, routed through third-party processing. 

"We cannot afford to turn a blind eye to global overcapacity reaching critical levels," said EU Trade Commissioner Maros Sefcovic. Global steel overcapacity is projected to reach 721 million tons by 2027, more than five times the EU's annual consumption. 

Whether the target is primarily China, the blow nevertheless falls hard on South Korea.

The EU bought $3.71 billion worth of South Korean steel in 2025, making it the country's largest export market — down from $4.48 billion in 2024, according to the Korea International Trade Association.  South Korea shipped about 3.31 million tons to the bloc last year, of which about 2.58 million tons entered duty-free under country-specific quotas. EU posed as relief to the U.S. that has been imposing 50 percent levies on steel and aluminum imports from June last year. 

The new EU framework resets baseline quotas to 2013 import levels — well before the global oversupply cycle intensified — meaning Seoul's allocation is expected to shrink significantly.

Korean steelmakers are still reeling from the U.S. blow. POSCO and Hyundai Steel, the country's two dominant producers, are estimated to have paid a combined $281 million in U.S. tariffs between March and December 2025. Korean steel exports to the United States have since plummeted after tariffs were doubled to 50 percent in June, with demand described by industry sources as "nearly depleted." 

The pressure compounds a longer-running squeeze from cheap Chinese steel flooding global markets.

At home, Hyundai Steel ran two rounds of early retirement programs in 2025 and permanently closed half of its rebar capacity at its Incheon plant in January, shuttering a 90-ton electric furnace as the domestic construction slump deepened.  In November 2025, the National Assembly passed the K-Steel Act, a 570 billion won support package to fund industry restructuring and bolster exports. But with the EU now confirming the tariff overhaul that had been under discussion since last October, pressure on Seoul to secure favorable quota terms has intensified. 

"Korean steel exports to the EU were already constrained within existing quotas, with limited room to expand," said Lee Jae-yoon, senior research associate at the Korea Institute for Industrial Economics and Trade.

"With the U.S. market effectively shut and domestic demand still weak, the EU should have been a growth outlet — but these new protective measures, combined with the EU Carbon Border Adjustment Mechanism, are closing that window." 

The double tariff squeeze has nonetheless forced a strategic pivot toward the United States. POSCO acquired a 20 percent stake worth $582 million in Hyundai Steel's planned $5.8 billion electric arc furnace mill in Louisiana, with commercial production expected in 2029. 
POSCO has also signed a strategic partnership memorandum with Cleveland-Cliffs, the second-largest U.S. crude steel producer, though the company said in a March regulatory filing that no final decision on equity participation or investment size has been reached. 

The EU's move is driven by a broader structural strain. European steel capacity has shrunk by 65 million tons since 2007, with about half of that loss since 2018. The sector operates at around 67 percent capacity — well below the 80 percent considered healthy — while import penetration hit a record 29 percent in the third quarter of 2025. 

Lee said Korean steelmakers will ultimately need to pivot toward green steel to navigate the tightening trade environment. Building production facilities in Europe — unlike in the United States — holds little commercial appeal, given the continent's own supply glut.
  "The U.S. offers higher prices, high energy costs that keep out cheap imports, and insufficient domestic capacity — making it attractive for investment," Lee said. "Europe is the opposite. It already has overcapacity, so there is little merit in setting up local production just to avoid tariffs." 

The Korean government is also moving to cushion the blow. Seoul has been in continuous contact with Brussels since the European Commission first unveiled the proposal in October, and has maintained those channels since Monday's agreement.

"We have been in constant dialogue with the EU since the initial proposal, and remain in close contact regarding the steel tariff and quota framework. No tangible agreement on Korea's specific allocation has been reached yet," a spokesperson for the Ministry of Trade, Industry and Energy said. 

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